Amy Joy Marx. Student number: Submitted in partial fulfilment of the requirements of the degree. Magister Legum

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1 THE DEREGISTRATION OF COMPANY FOR FAILING TO SUBMIT ANNUAL RETURNS IN TERMS OF SECTION 82(3) OF THE COMPANIES ACT 71 OF 2008, AND THE RESTORATION OF THE COMPANY TO THE COMPANIES REGISTER IN TERMS OF SECTION 82(4) AND SECTION 83(4) BY A CREDITOR. By Amy Joy Marx Student number: Submitted in partial fulfilment of the requirements of the degree Magister Legum Supervised by Professor P Delport Department of Mercantile Law Law Facility University of Pretoria November 2014 (Words: P a g e

2 Index Page Chapter 1: introduction 4 Chapter 2: The 1973 Companies Act Introduction Section 73(6) Section 73(6A) General discussion of section 73(6) and section 73(6A) Section Concluding remarks 12 Chapter 3: Sections dealing with deregistration and restoration in terms of the Companies Act Introduction Section 82(3) Section 82(4) Section 83(4) Life of the company section 19(1) 15 2 P a g e 3.6 Concluding remarks 15

3 Chapter 4: Interpretations of section 82(4) and section 83(4) Introduction Section 82(4) reinstatement Section 83(4) void dissolution Difference between dissolution and deregistration Section 82(4) retrospective effect Section 83(4) retrospective effect An order that is just and equitable Use of both section 82(4) and section 83(4) Concluding remarks 28 Chapter 5: UK Act and case law Introduction Comparison of the wording in the UK Act and the new Act English case law Concluding remarks 35 Chapter 6: Conclusion 37 Bibliography 42 Addendum: Practical issues faced by creditors 44 3 P a g e

4 Chapter 1: Introduction A company is a juristic person from the date its incorporation is registered, and exists until the date upon which its name is removed from the companies register. It has legal powers and capacity to act in its own name. 1 When a company is removed from the register of companies it ceases to exist as a juristic person and is dissolved from that date. 2 During a profit company s life it uses the juristic personality to further its business objectives. The company can enter into contracts in its own name, incur debt, and become liable in legal action. It is because of this that at the end of a company s life the people the company contracted with have the opportunity to claim what is legally owed to them in a proper manner as stipulated in terms of the Companies Act 71 of These procedures are in place for both voluntary winding up of a solvent company 4 and the winding up of a solvent company by court order. 5 After the process and procedures in section 80 or 81 of the Act are followed, the Master must file a certificate of winding up, but only once the affairs of the company are completely wound up. 6 Creditors rights are protected and they have a reasonable opportunity to claim what is legally owed to them. However, in terms of section 82(3)(a)(i) of the Act, the commission may remove a company from the companies register if it has failed to file an annual return for two or more years. The commission can demand reasons from the company for why it failed to file its returns as it is required to do in terms of section 33 of the Act, or otherwise show satisfactory cause for the company to remain registered. 7 In terms of section 83(1) of the Act, a company is dissolved as of the date its name is removed from the companies register unless it has been removed so that a company may be transferred to a foreign jurisdiction. This means that the company no longer stands as a juristic person. 1 Section 19(1)(a) and (b) of Act 71 of Section 83(1) of Act 71 of Hereafter referred to as the Act 4 Section 80 of the Act 5 Section 81 of the Act 6 Section 82(1) of the Act 7 Section 82(3)(a)(ii) of the Act 4 P a g e

5 When the procedures intended for the winding up of a company have not been followed, as would be the case if a company s name was removed from the register for failing to file its annual returns, none of the creditors rights have been taken into account. The property owned by the company at the time it was removed from the register, be it movable property, immovable property, or debt owed to the company, become bona vacanti to the state. The company loses its legal standing, and as such it cannot own property or enforce debt owed to it as it no longer has a name to act in. The creditors of a company that has been dissolved in terms of section 82(3)(a)(i) of the Act have no direct claim to the assets formerly held by the company. The only way in which their claims can be satisfied is for the company to be reinstated so that they can institute claims against a legal person with the capacity to be a party to legal proceedings. Whether the creditors intend on winding the company up after reinstatement or proceeding with a liquidation application, there are ways in which the creditors can recover at least some of the debt owed to them. The creditors at this point sit with the task of having to return the company s juristic personality, as its name must be placed on the companies register in order for a company to exist. The creditors have a remedy in terms of section 82(4) of the Act to reinstate the registration of the company. A prima facie read of this section suggests a quick fix to a potentially disastrous situation for the creditors. However, this is far from the case. In terms of Regulation 40 8, specifically 40(6), the commission may reinstate the company to the register once it has filed its outstanding annual returns and paid the outstanding prescribed fee. The fact that the returns were not filed and the company failed to respond to the demands of the commission made prior to its deregistration might indicate that obtaining the outstanding annual returns will be an almost impossible task for a creditor who has no connection to the company other than the debt owed by it. Section 83(4) of the Act allows the court to make an order declaring that the dissolution of the company is void, or that any other order that is just and equitable in the circumstances. If the court declares the dissolution to be void then any proceedings may be taken against the company as if it had not been dissolved. This section can potentially help the creditor, if interpreted to include dissolution by deregistration of the company in terms of section 82(3)(a)(i) of the Act. 8 Companies Act 71 of 2008 regulations 5 P a g e

6 The purpose of this dissertation is to closely analyse the impact of deregistration of a company for failing to file its annual returns. Furthermore, it will investigate the remedies that a creditor might enact in order to reinstate the company s name on the register, the sole purpose being to be able to institute legal proceedings against the company so as to collect the debt owed to that creditor. In doing this I will look at recent case law dealing with the particular sections involved in the deregistration, dissolution, and reinstatement of companies to the register, as well as the remedies available and to what extent they may be used. I will look at the Companies Act 61 of 1973 briefly and purely as a tool for interpretation where relevant. I will also look at the English Law regarding deregistration and dissolution of companies. 6 P a g e

7 Chapter 2: 1973 Companies Act 2.1 Introduction In order to ascertain if the 1973 Act 9 can be of any assistance with regard to the interpretation of section 83(4) 10 and section 82(4) 11, one must first look to see if there is a material difference in wording between the sections relevant to deregistration of a company failing to hand in annual general returns in term of the 1973 Act 12 and in terms of the new Act. A material difference in wording or interpretation could also indicate a change in the legislature s intention, which could also be a useful tool in finding the true implications of section 82(4) and section 83(4) of the new Act. However in the ABSA bank 13 Appeal case the court made the following comment that aptly explains the brevity of this chapter; The distinction in the repealed legislation can be relevant only if there is a basis for inferring that the provisions of the new legislation intended to maintain the distinction. I do not believe there is such a basis. The 2008 Companies Act is not a codification of the 1973 Act. The new Act is a complete re-writing of our corporate law. There are many new provisions and procedures. While some other provisions are, unsurprisingly, similar to those in the old Act, there is in many instances a change in language. 2.2 Section 73(6) In terms of the 1973 Act 14, the sections that dealt with deregistration and reregistration after a company had been removed from the register for failing to submit annual general returns are section 73(6), section 73(6A) and section 420 of the old Act. In terms of section 73(6) of the old Act: 9 Act 61 of Act 71 of Act 71 of 2008 hereafter referred to as the new Act 12 Act 61 of para Act 61 of 1973 hereafter referred to as the old Act 7 P a g e

8 (6) (a) The Court may, on application by any interested person or the Registrar, if it is satisfied that a company was at the time of its deregistration carrying on business or was in operation, or otherwise that it is just that the registration of the company be restored, make an order that the said registration be restored accordingly, and thereupon the company shall be deemed to have continued in existence as if it had not been deregistered. (b) Any such order may contain such directions and make such provision as to the Court seems just for placing the company and all other persons in the position, as nearly as may be, as if the company had not been deregistered. The old Act states in section 73(6)(a) that a Court may grant an order restoring the company. This implies that the court has the discretion to grant the order, even if all the prerequisites imposed by the section are satisfied. In exercising this discretion, the court will have the opportunity to assess the potential harm to third parties that an order restoring the company might bring. 15 In terms of section 73(6), it seems that the old Act empowered the court to restore a company and validate all the actions taken by the company whilst it was deregistered 16.Thus, if a company is restored to the register it is done so with retrospective effect to the actions of the company during the time it was deregistered. However as the Judges in Insamcor 17 found, making an order in terms of section 73(6) of the old Act cannot be oversimplified, automatically restoring the company to what it was, as this could severely prejudice third parties. 18 As the court has a discretion it may listen to third parties who might persuade the court to make an order that does or does not restore the company, and such discretion may serve to alleviate the prejudicial consequences Insamcor (Pty) Ltd v Dorbyl Light & General Engineering (Pty) Ltd2007 (4) SA 467 (SCA) 16 Insamcor (Pty) Ltd v Dorbyl Light & General Engineering (Pty) Ltd2007 (4) SA 467 (SCA) at para Insamcor (Pty) Ltd v Dorbyl Light & General Engineering (Pty) Ltd2007 (4) SA 467 (SCA) at para Insamcor (Pty) Ltd v Dorbyl Light & General Engineering (Pty) Ltd2007 (4) SA 467 (SCA) at para Insamcor (Pty) Ltd v Dorbyl Light & General Engineering (Pty) Ltd2007 (4) SA 467 (SCA) at para 27 8 P a g e

9 2.3 Section 73(6A) In terms of section 73(6A) of the old Act: (6A) Notwithstanding subsection (6), the Registrar may, if a company has been deregistered due to its failure to lodge an annual return in terms of section 173, on application by the company concerned and on payment of the prescribed fee, restore the registration of the company, and thereupon the company shall be deemed to have continued in existence as if it had not been deregistered: Provided that the Registrar may only so restore the registration of the company after it has lodged the outstanding annual return and paid the outstanding prescribed fee in respect thereof. The old Act distinguished between dissolution and when and how it could be avoided, as well as deregistration and when and how a company could be restored to the register. Although the circumstances that triggered both applications as well as the requirements to succeed differed, both applications could be made to the court, as the old Act gave the court a wide direction. 20 The restoration of a company was to restore its status and restoration in terms of section 73 of the old Act automatically voided dissolution General discussion of section 73(6) and section 73(6A) The appeal court for the ABSA bank Appeal case 22 made for an apt summary of what the different grounds were for a company, which had been deregistered as a result of failing to hand in its annual returns, to be restored by the court or by the registrar in terms of section 73(6) and section 73(6A) of the old Act: Such a company could have its registration restored by the court in terms of s 73(6) or by the Registrar in terms of s 73(6A). However, the grounds on which the court and the Registrar respectively could restore the company differed: [a] A court could restore the company (regardless of the basis of deregistration) if satisfied that at the time of deregistration the company had been carrying on business or had been in 20 Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para Absa Bank Ltd v Companies and Intellectual Property Commission and Others 2013 (4) SA 194 (WCC), [2013] 3 All SA 9 P a g e

10 operation or that it was otherwise just and equitable to do so. [b] The Registrar could restore the company only if the company had been deregistered due to failure to lodge an annual return and only after the company had lodged the outstanding return and paid the prescribed fee. 23 The word dissolution is not used in section 73 of the old Act. A company ceases to exist when it is deregistered, but this was subject to the fact that the company could later be restored. 24 The stated effect of restoration of registration in terms of these provisions was that the company would be deemed to have continued in existence as if it had not been deregistered. 25 It has recently been confirmed by the Supreme Court of Appeal that this means that the company s actions and conduct during the period of deregistration are deemed to have been undertaken by an existing company according to the Kadoma Trading case Section 420 According to section 420 of the old Act: When a company has been dissolved, the Court may at any time on an application by the liquidator of the company, or by any other person who appears to the Court to have an interest, make an order, upon such terms as the Court thinks fit, declaring the dissolution to have been void, and thereupon any proceedings may be taken against the company as might have been taken if the company had not been dissolved. Voiding dissolution in terms of the old Act did not automatically restore registration in terms of the old Act. However, section 420 of the old Act did give the court the flexibility to make an order it deemed fit, and it also allowed for any proceeding to be taken against the 23 para para para Kadoma Trading (Pty) Ltd v Noble Crest CC [2013] ZASCA P a g e

11 company as if it had not been dissolved. Section 420 read with section 73 of the old Act empowered the court when it made an order in terms of section 420 to direct the registrar to restore registration. 27 The difference between section 73 and section 420 of the old Act was that if a company had been dissolved and the dissolution was voided, then all of the assets and liabilities the company had prior to its dissolution would be re-vested but the actions of the company during the time it was dissolved would not be validated. 28 In terms of section 420 of the old Act the dissolved company s existence as a legal person is restored but its corporate activity is during the time it was dissolved is not. This means that voiding the dissolution has retrospective effect on the legal personality but it in no way ratifies or retrospectively validates any corporate activity. 29 The word deregistered is not used in section 420 of the old Act the event that brought the company s life to an end was the registrars recording of the dissolution. 30 This is perhaps one of the big differences between the new Act and the old Act. In the old Act the concepts of dissolution and deregistration are dealt with completely separately, they are not part and parcel of each other as they are in the new Act 31 section 420 of the old Act was triggered by either one of two events, the voluntary winding up by the company or by creditors or winding up and liquidation by court order. 32 Restoring the registration of a company that had been deregistered for failing to deliver its annual returns was dealt with under section Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para P a g e

12 2.6 Concluding remarks Some believe that the new Act is an improvement of the old Act in some respects however the legislature s departure from the old Act has still allowed some of the old problems to transfer into the new Act. From the restructuring and wording change new problems have appeared in the new Act. 34 It can be seen from the above short synopsis that the old Act gave the court a very wide discretion; the court had the final word in terms of section 73 of the old Act to make a judgment that the court deemed just. The old Act specifically allowed for retrospective effect by using the phrase, deemed to have continued in existence as if it had not been deregistered and taken if the company had not been dissolved. However, the old Act allowed the court to temper any prejudicial effect that retrospectively could have on third parties by giving the court the discretion to allow certain acts to be retrospective and others not to be retrospective. 34 de Lange and Sutherland, Deregistrasie sonder likwidasie van maatskappye en beslote korporasies ingevolge die 2008 maatskappywet, STELL LR at page P a g e

13 Chapter 3: Sections dealing with deregistration and restoration in terms of the Companies Act Introduction In order to understand the interpretations of the courts with regard to sections 82(3) and (4), as well as section 83(4) of the Companies Act, 35 a short outline of the wording of the sections must be given. This chapter will look very briefly at the relevant sections dealing with deregistration as a consequence of a company failing to submit annual returns for two years, as well as give a somewhat superficial explanation and face value interpretation of each of the sections. As such, this chapter serves more as a prologue to the subsequent two chapters than as a chapter on its own, and will thus be kept brief. 3.2 Section 82(3) In terms of section 82(3) of the new Act, the commission 36 may remove a company from the companies register if the company has transferred its registration to a foreign jurisdiction, or has failed to file its annual returns, as is required, for a period of two or more years in succession. The commission has formalities to follow in terms of this removal and must demand satisfactory reasons for the failure to file the required returns, or be given reasons why the company should remain on the register. Deregistration in terms of section 82(3) of the new Act is the only deregistration this dissertation will look at. Deregistration as a consequence of the winding up of a solvent or insolvent company for other reasons will as such not be the focus. If a company has been deregistered in terms of section 82(3) of the new Act, and an interested person would like the company to be returned to the companies register, for whatever reason, that interested person must do so in terms of section 82(4) or, potentially, depending on the interpretation, section 83(4). This return or restoration onto the register is the focus of this dissertation, and the specific consequences of the return or restoration are of the utmost importance in answering the question posed by this academic piece. 35 Act 71 of 2008 hereafter referred to as the new Act 36 Companies and Intellectual Property Commission hereafter referred to as the commission 13 P a g e

14 3.3 Section 82(4) There are two potential methods of reviving a deregistered company, namely section 82(4) and section 83(4) of the new Act. Section 82(4) of the new Act gives a mechanism whereby the commission reinstates the company to the companies register. Section 83(4) of the new Act gives an interested party an opportunity to approach the court to void the dissolution. These two methods, subject to the interpretation of the courts in relevant case law, as well as the differences between them, will be dealt with in depth the subsequent chapter. Section 82(4) of the new Act reads as follows: If the Commission deregisters a company as contemplated in subsection (3), any interested person may apply in the prescribed manner and form to the Commission to reinstate the registration of the company. In terms of this section, an interested person may apply to the commission to reinstate the company to the register. The exact meaning of reinstatement of a deregistered company will be fully discussed in the subsequent chapters. This section depicts an administrative reinstatement of a company without any intervention of the court. This section also deals specifically with a situation where a company is deregistered due to its failure to submit its annual returns for two years. Section 82(4) of the new Act does not give a clear indication of whether or not this reinstatement is retrospective. 3.4 Section 83(4) Section 83(4) of the new Act reads as follows: At any time after a company has been dissolved (a) the liquidator of the company, or other person with an interest in the company, may apply to a court for an order declaring the dissolution to have been void, or any other order that is just and equitable in the circumstances; and (b) if the court declares the dissolution to have been void, any proceedings may be taken against the company as might have been taken if the company had not been dissolved. 14 P a g e

15 This section allows the court to intervene if a company has been dissolved. The section specifically deals with dissolution and declaring the dissolution void. It is on face value uncertain whether this section allows a court to place the company on the companies register again. This section is clearly not the same as section 82(4) of the new Act, and it seems that it is in no way another means of achieving an administrative reinstatement. It clearly depicts court intervention, but a superficial interpretation cannot specify to what extent. 3.5 Life of the company section 19(1) At this point it might be wise to investigate what removal from the companies register means with regard to the corporate personality of the company. According to section 19(1) (a) of the new Act, from the time and date a company is registered it exists continuously until its name is removed from the companies register. As such, when a company is removed from the register it ceases to exist and will not have all the powers and capacity of an individual; thus it will no longer be a juristic person. 37 One can therefore assume that once a company is removed from the register it is dissolved, as it no longer exists. 3.6 Concluding remarks The wording in section 83(4) of the new Act does not give a clear explanation of what the court can and cannot do when it voids dissolution, and whether the new Act allows a court to return a company to the companies register, if it deems it just and equitable to do so. The fact that this section is vague with regard to the exact ability of the court gives stronger weight to the interpretation of the court in case law to define the exact extent and parameters of the power granted in terms of section 83(4) of the new Act. From this point the following chapter focuses on what the case law has determined the courts powers to be. 37 Section 19(b) of the new Act 15 P a g e

16 Chapter 4: Interpretations of section 82(4) and section 83(4) 4.1 Introduction In terms of the Companies Act; 38 a company can be deregistered as a consequence of failing to submit its annual returns for a period of two or more years by the commission, 39 this deregistration is done without application to court and in many cases without the knowledge of creditors. This procedure can and in most cases does, severally prejudice creditor or other interested persons. As previously discussed a company ceases to exist when it is removed from the register of companies, leaving the creditors of the company with very few remedies when attempting to enforce its debt. Rationally if the company is restored to the register and regains its corporate personality a creditor can use the many remedies available to collect such debt. Reviving the company is thus the goal of a creditor; this chapter will look at the processes the new Act has put in place for the reviving of a company that has been deregistered. The company is deregistered to punish the company for failing to submit its annual returns and the legislature failed to take the creditor into account Section 82(4) reinstatement Section 82(4) empowers the commission to reinstate a company s registration if its name was removed from the register on any of the permitted grounds other than pursuant to the company s liquidation as a solvent company. 41 The effect of reinstatement is not specified, there is no mention of whether or not the company will upon reinstatement be deemed to have continued in existence as if it had not been deregistered. 42 The circumstances in which a person will seek reinstatement in terms of section 82(4) are situations in which an interested person only seeks to restore the formal existence of the 38 Act 71 of 2008 hereafter referred to as the new Act 39 Companies and Intellectual Property Commission hereafter referred to as the commission 40 de Lange and Sutherland, Deregistrasie sonder likwidasie van maatskappye en beslote korporasies ingevolge die 2008 maatskappywet, STELL LR at page para para P a g e

17 company. 43 This administrative reinstatement must logically include the restoration of the company s legal personality and its title in its property. 44 The court in Nulandis postulated the following with regards to section 82(4) of the new Act; 45 the text of s 82(4) lends itself to one meaning only: The Commission, not the court, has the power to reinstate a deregistered company. Similarly to the old Act, this power of the Commission is limited to s 82(3) administrative de-registrations, i.e. for failing to file returns. Section 82(4) does not empower the Commission to restore a company deregistered after being wound up in terms of s 82(1) and (2). This interpretation of the section shows that the commission has no discretion whether or not to deregister a company, 46 and furthermore that section 82(4) does not allow the commission any discretion when to reinstate a deregistered company to the companies register Section 83(4) void dissolution The guiding question when looking whether or not section 83(4) of the new Act can be used if a company was deregistered because it failed to file its annual returns in terms of section 82(3) is whether or not section 83(1) applies to companies deregistered as a result of section 82(3). In the ABSA bank 48 Appeal case, the court drew the conclusion that it must have been the legislature s intention to allow section 83(4) to apply to companies that have been administratively deregistered in terms of section 82(3) as section 83(1) expressly excludes from dissolution the case of a company whose name has been removed from the register on 43 Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para (unreported) at para (unreported) at para 26 read with Regulation 40(6) of the Companies Act 71 of para P a g e

18 its own application because it has moved its registration to a foreign jurisdiction. 49 If section 83(1) applied only to companies dissolved pursuant to liquidation, it would not have been necessary for the lawmaker specifically to exclude section 83(1) s operation in the case of companies deregistered in terms of section 82(5). 50 The fact that this special exclusion was created shows that section 83(1) applies in general to companies whose names have been removed from the register, and not only to those deregistered pursuant to liquidation. 51 If section 83(1) applies to all cases of removal from the register, the same must be true of section 83(4). 52 Section 83(4) applies in all cases where a company or corporation s name has been removed from the register and where the company has as a result been dissolved. 53 In terms of the old Act the dissolution of a company could only have been achieved by wounding-up of the company, section 83(4) has reference to a company that has been dissolved the reason for the dissolution is now unimportant. 54 Section 83(4) applies to any company which has been dissolved and is in broadly similar terms to the old Act s section 420, with the exception that the relief which may be sought and granted is not confined to an order declaring the dissolution void; the court may also grant any other order that is just and equitable in the circumstances. 55 Muller AJ stated that the ambit of section 83(4) of the Companies Act is wider than section 420 of the old Act. 56 According to the court in Nulandis 57 section 83(4) does not provide for the restoration of a company on the companies register, it only enables a court to void dissolution of a 49 para para para para para (unreported) at para para (unreported) at para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) 18 P a g e

19 company. 58 The company as such, after the voiding of the dissolution exists as an association of members. 59 This view was however heavily criticised by authors, the main contention is that However, this interpretation is not be correct as section 83(4)(b) of the new Act expressly provides that that action may be taken as against the company and not the association of members. 60 If a dissolution is therefore voided, and it is accepted that the assets now vest in the association of members, section 83(4)(b) does not authorise action against the members. The court in Nulandis had the following final comments on section 83(4); 61 My interpretation is that s 83(4) empowers a court to declare the dissolution of a company to be void. However, the discretion to make any order that is just and equitable does not go far enough to confer power on the court to order the reinstatement of Greenacres on the register of companies. That power remains exclusively within the realm of the Commission. The power given to the court in section 83(4) to declare the dissolution of a company void is not a review power to be exercised only upon proof of some irregularity or unlawfulness in the act of removing the company s name from the register, if this were the case the courts would not have to use section 83(4) as the court has an ordinary power of review. 62 According to the court in Du Rand 63 The words or other person with an interest in the company in section 83(4)(a) of the new Act, must be given the widest possible interpretation to include any person with a financial interest in the company. 64 In terms of section 83(4)(a) the court may grant any order that is just and equitable, this should mean that if the removal of a company s name from the register is the event bringing about its 58 Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para 7 59 Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para PA Delport et al, Henochsburg on the Companies Act, 71 of 2008 (Service issue 8) at page 332(10) 61 Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para para (unreported) 64 (unreported) at para P a g e

20 dissolution, an order that the dissolution is void would necessarily imply that the company s name must be restored to the register Difference between dissolution and deregistration According to the court in Nulandis 66 in terms of the old Act distinction was made between dissolution and deregistration, deregistration terminated the legal status of the company and dissolution by winding up and liquidation terminated the company. 67 The ABSA bank 68 Appeal case stated that in terms of the new Act the concepts of dissolution and removal from the register are brought together by the provision in section 83(1) in that a company is dissolved as of the date its name is removed from the register. The court in Nulandis 69 held that the new Act materially differs from the old Act as dissolution and deregistration are combined in section 82 and section 83(1) as can been seen from section 83(1) of the new Act, the effect of removal of a company from the register is that the company is dissolved as of the date its name is removed from the companies register unless the company is being moved to a foreign jurisdiction. 70 As stated in Nulandis; 71 Conflating deregistration with dissolution in s 83(1) is the consequence of the figurative stroke of a single pen by the same authority, i.e. the Commission. Irrespective of whether the cause of the deregistration is the winding up of the company in terms of s 82(1) and (2) or the company s failure to file its annual returns in terms of s 82(3), deregistration ensues, triggering the automatic dissolution of the company. Thus it may happen that a company is deregistered for failing to lodge returns. Even though that company still has assets and is trading, it could be 65 (unreported) at para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) 67 Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para 9 68 para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para P a g e

21 dissolved. By not distinguishing in s 83(1) of the new Act between the causes of deregistration, and consequent dissolution. 4.5 Section 82(4) retrospective effect In Peninsula eye clinic 72 the court looked specifically at the retrospective effect of section 82(4) of the new Act. In the facts of the case after deregistration had taken place in terms of section 82(3) of the new Act an award was granted to the Applicants in the matter, as a result of an arbitration, granted after the company was deregistered. 73 The Applicants contended that the reinstatement of the company onto the companies register had retrospective effect, thus validating any acts done by the company during the time it was deregistered. 74 The Judge in the Peninsula eye clinic case, looked at the fact that in terms of the Old Companies Act 75 sections 73(6) and section 73(6A) gave express retrospective effect and the absence of this specific retrospective effect in section 82(4) did not mean that the legislature intended for the section not to be retrospective. 76 The question then arises whether this retrospectivity, should it be agreed that section 82(4) is indeed retrospective, is in relation to the company s juristic personality and the restoration to it of its property or if it also includes the corporate activity undertaken on its behalf and its name during the period it was deregistered. 77 The court in Peninsular Eye Clinic 78 which was also agreed on the same interpretation in the Fintech 79 case found that the prima facie interpretation of reinstate means to put something 72 Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Act 61 of 1973 hereafter referred to as the old Act 76 Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Fintech (Pty) Ltd v Awake Solutions (Pty) Ltd and Others 2013 (1) SA 570(GSJ) at para P a g e

22 back to its previous state, thus it is indicative of the legislative intention to restore a company with retrospective effect. Administrative reinstatement in terms of section 82(4) of the new Act does not give retrospective effect to the corporate activity of the company, if it did there could be potentially undesirable effects attached to that retrospectivity. 80 However third parties may apply to the courts for an order in terms of section 83(4) of the new Act for an order that is just and equitable to retrospectively validate specific acts, this would allow the courts judicial regulation of the potentially hazardous effects of automatic retrospectivity. 81 The Supreme Court of Appeal gave the following comment on the reason why restoration cannot run retrospectively; 82 Section 82(4) of the 2008 Act now allows the registration of deregistered company or close corporation to be reinstated, but the provision permitting the restoration to operate retrospectively was omitted, perhaps because the lawmaker is now aware of potential anomalies. 4.6 Section 83(4) retrospective effect According to the court in the Peninsular Eye Clinic 83 case, section 83(4)(b )of the new Act is in all material respects identical to the provisions of section 420 of the old Act, and the sections should be interpreted in the same manner, the court stated the following; an order declaring the dissolution of a company to have been void does not affect the fact of the dissolution or give validity to acts purportedly carried on by, with or against the company between the date of the company s dissolution and the making of the order declaring the dissolution to have been void. The company s corporate existence is restored with effect from the date of its dissolution, but not its corporate activity. 80 Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para CA Focus CC v Village Freezer t/a Ashmel Spar [2013] ZASCA 136 at para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para P a g e

23 The court in the ABSA bank 84 Appeal case, found that in terms of an order in terms of section 83(4) the assets will no longer be bona vacantia and will vest in the company again. The court made it clear that it in no way vested these assets with retrospective effect, a retrospective order whereby a company is deemed to have somehow existed during the time it was dissolved, would go against the ordinary effect of declaring that the dissolution was void. 85 However the court found that it did have the discretion to make an order that is just and equitable and this order may include a power to validate things that happened during the time the company was dissolved. 86 Furthermore the court stated that the liabilities the company had prior to its dissolution would vest in the company once again, unless the court used its discretion to allow some debts during the time that the company was dissolved to form part of the debts of the restored company. 87 The companies were dissolved due to contrivance on the part of the directors or shareholders not to render the annual returns in terms of the provisions of the Companies Act so that the companies may be dissolved to the prejudice of applicants or other contingent creditors. 88 The dissolution of the companies brought about the end of their existence and effectively defeated the claim of applicants against the companies. 89 The directors or shareholders succeeded not to be subjected to proceedings that might follow as a result of a winding-up order. 90 It is not in the interest of justice and will be prejudicial to creditors to allow such a state of affairs to continue when the dissolution has become an instrument of injustice. 91 When the dissolution is voided the company will by necessary implication be restored with retrospective effect Absa Bank Ltd v Companies and Intellectual Property Commission and Others 2013 (4) SA 194 (WCC), [2013] 3 All SA 85 para para para (unreported) at para (unreported) at para (unreported) at para (unreported) at para (unreported) at para P a g e

24 The court in the Peninsular Eye Clinic case commented on the scope of section 83(4) of the new Act in the following way; The ambit of s 83(4) is wide enough to empower a court to deal not only with the validation, conditionally or otherwise, of corporate activity purportedly conducted on behalf of the company during its period of deregistration, but also, if it is just and equitable to do so, with any prejudicial consequences of the ordinarily retrospective effects of reinstatement, viz. the re-establishment of corporate personality, the reinvestment of ownership of property and the reconstitution of the company s board of directors and general body of members. The wide breadth of the court s power in terms of the second category of remedy affords the ability to make the effect of any restoration of the company retrospective, whether generally or selectively. 4.7 An order that is just and equitable The court in the Peninsula Eye Clinic case interpreted this part of section 83(4) of the new Act to be a remedy on its own 93 and a remedy that can be used with section 82(3) or section 83(4) of the new Act. This view is also the view held by Rogers J in the ABSA Bank 94 Appeal case where he stated that; An order that is just and equitable may entail a declaration that the dissolution is void together with ancillary relief. This remedy is thus very wide, it can include an order stating that some third parties be placed in the same position they would have been in had the company not been deregistered Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para P a g e

25 An order that is just and equitable in terms of section 83(4) of the new Act gives a court a wide discretion to decide each application on its own merits. 96 The Court has an unencumbered discretion to come to the aid of interested persons in appropriate this discretion is given to it by section 83(4). 97 It may not only declare the dissolution of a company void ab initio, but is also able to make any other order that is just and equitable, this discretion must be exercised judicially taking into account all relevant factors. 98 As the court in Du Rand 99 did, I too quote the words of the Constitutional Court in the Weare 100 case regarding what the ambits of an order that is just and equitable must be; This Court may make any order that is just and equitable. The duty to give just and equitable relief recognises that the position dictated by the objective doctrine may not always be a feasible one in practice. A decision as to what is just and equitable involves a balancing of the interests of the individuals affected with the interests of good governance and the smooth administration of justice. The important modification made by the lawmaker when dissolution and deregistration are brought together is that the court is now not confined to making an order declaring the dissolution void; it may make any other order that is just and equitable in the circumstances Use of both section 82(4) and section 83(4) In the Fintech case the court looked to see if it may intervene in a reinstatement in terms of section 82(4), van Oosten J stated the following 102 ; 96 Nulandis (Pty) Ltd v Minister of Finance and Others 2013 (5) SA 294(KZP) at para (unreported) at para (unreported) at para (unreported) at para Weare and Another v Ndebele NO and Others 2009 (1) SA 600 (CC) at para para Fintech (Pty) Ltd v Awake Solutions (Pty) Ltd and Others 2013 (1) SA 570(GSJ) at para P a g e

26 no reason why the court should not be able to exercise its inherent jurisdiction, in view of the absence of an enabling statutory provision under the 2008 Act, on application or otherwise, to validate anything done by or against the affected company between deregistration and its reinstatement, and to make such order as it makes appropriate. The court in Peninsular Eye Clinic 103 however disagreed with this notion stating that the only source of this power is in terms of section 83(4) of the new Act and that the court did not have the inherent jurisdiction to make an order to declare acts retrospective in terms of section 82(4) of the new Act. 104 The view that a court does not have a inherent jurisdiction to make orders that declare certain acts retrospective during the time a company is deregistered is also adopted in the Bay Bright Property Services 105 case, this case however held that a court doesn t have this inherent jurisdiction not because it was provided for in terms of section 83(4) of the new Act but because it went against the express legislative will. In the Peninsula Eye Clinic 106 case the court did supplement its statement that the source of the court s power to make any order making some acts retrospective cannot come from section 82(3) by stating the following, this view is also followed in the ABSA Bank 107 Appeal case; Whereas the current legislation draws together in two provisions in the same part of the Act the consequences of the deregistration of companies and the winding up of solvent companies, it provides three different remedies for any interested party seeking to avoid or reverse the consequences of those dissolving actions: 103 Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) 104 Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Bright Bay Property Service (Pty) Ltd v Moravian Church in South Africa 2013 (3) SA 78 (WCC) at para Peninsula Eye Clinic (Pty) Ltd v Newlands Surgical Clinic (Pty) Ltd and Others 2012 (4) SA 484 (WCC) ([2012] 3 ALL SA 183 (WCC)) at para Absa Bank Ltd v Companies and Intellectual Property Commission and Others 2013 (4) SA 194 (WCC), [2013] 3 All SA 26 P a g e

27 (i) administrative reinstatement of registration in terms of s 82(4) this remedy is available only when a company has been dissolved in terms of s 82(3) read with s 83(1), (ii) a court order declaring the company s dissolution to have been void in terms of s 83(4), or (iii) any order - also in terms of s 83(4) - that would be just and equitable in the circumstances, which, on the authority of Absa Bank v CPIC, might include an order restoring a company that had been administratively deregistered to the register and regulating the consequences thereof. As confirmed in the full court s judgment in Absa Bank Ltd v CIPC the remedies are not mutually exclusive. As stated above the judges in the ABSA bank 108 Appeal case the court decided on whether the section 83(4) remedy is available to and applies to a company or close corporation which has been deregistered in terms of section 82(3) of the new Act. 109 The court had no difficulty in concluding that section 83(4) applies as much to a company or corporation dissolved pursuant to administrative deregistration as to one dissolved pursuant to its liquidation as a solvent company. 110 The liquidation of solvent companies and the administrative deregistration of companies are dealt with together in the same part of Chapter The court further concluded that in all the cases dealt with in Part G the term used to denote the termination of the company s existence is dissolution, and in terms of section 83(1) this occurs in all instances on the date the company s name is removed from the register, whether this is done pursuant to section 82(2)(b) in the case of winding up or section 82(3) in the case of administrative deregistration. Deregistration and removal of a 108 para para para para P a g e